ASX ANNOUCEMENT: QRI Market and Portfolio Update – December 2020
8 February 2021
We are pleased to present the Qualitas Real Estate Income Fund (ASX:QRI) quarterly update for December 2020 to investors. You can view this latest update in the ASX Announcement.
Hear from Andrew Schwartz (Group Managing Director), Mark Fischer (Global Head of Real Estate) and Nick Bullick (Director, Real Estate), present QRI’s performance in stablised commercial real estate (“CRE”) debt market conditions following the height of the COVID-19 pandemic.
Funds Returns
The Trust continued to deliver cash distribution income at attractive and healthy premiums [1] above the current low RBA Cash Rate of 0.10% p.a., achieving a December quarter (3-month) net return and distribution return of 6.45% p.a. and 6.15% p.a. respectively which are within the current Target Return range of 5.10% – 6.60% p.a.
The Manager is confident, based on the current loan portfolio and subject to no unexpected repayments, that the Trust’s strong invested position will underpin a consistent level of distributions to investors of at least 6.0% p.a. and the forecast monthly distribution return is expected in the upper range of the current Target Return of RBA + 6.50% p.a. until March 2021. [2]
December quarter market and portfolio recap
2020 closed as one of the toughest years for global economies which has reset the way we live. Despite the uncertainty, the Manager navigated this well and met the Trust’s investment objectives, delivering consistent and attractive returns to QRI unitholders whilst preserving capital.
The Trust’s target markets within the broader Australian CRE debt market stabilised following the height of the COVID pandemic, supported by the unprecedented lower RBA cash rate of 0.10%. Pleasingly, the Manager continued to experience significant deal flow which enabled selective CRE loan investment.
Borrower demand remained robust allowing the Trust to invest in 11 new loans (including extended loans) totalling $112m, using proceeds from loan repayments as well as a partial redemption of the Qualitas Senior Debt Fund units.
Of these new loans, two new mezzanine loans totalling $25.8m were secured for the Trust with attractive risk return metrics which increased the Trust’s direct mezzanine loan exposure [3] to 8% (from 1.5% as of the September quarter) which is expected to be accretive to the Trust returns.
Importantly as a result of the strong deployment in the December quarter, the Trust’s capital is now fully allocated [4] to investments until end of June 2021.
The Trust recalibrated the portfolio to a post-COVID-19 environment, with 83% of the [5] QRI loan portfolio’s underlying securities properties having been re-valued since the onset of COVID-19 to reflect new market conditions.
The QRI portfolio of 36 loans remains well diversified across loan type ranking, location, sponsor and property sector, and there were no impairments, with the NAV remaining stable at $1.60 since the IPO and during the COVID period.
Trust benefit to investors
As investors search for yield and capital stability in an uncertain environment, QRI continues to seek to deliver investors benefits including:
- Fixed income in the form of regular monthly cash distributions [6]
- Attractive and healthy premiums above the current low cash rate [7]
- Capital preservation, as all CRE loans enjoy security by way of real property mortgages
- Stable net asset value at or above $1.60 with no impairments since the IPO, supported by the Trust’s simple and robust loan valuation process
- CRE debt asset class differentiation managed by a local property specialist with expertise in investing across both real estate debt and equity
- Domestically focused investments with 100% of the portfolio currently invested in Australia only.
Access the full transcript here
10 February 2021
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[1] The premium achieved is commensurate to the investment risk undertaken.
[2] Forecast about future performance are not guarantee and may not occur.
[3] Direct mezzanine loans only, excludes AFWT notes.
[4] Allocated to investments is where the Trust has allocated capital to an investment which is yet to be invested. The Trust’s capital is fully allocated to investments when accounting for a ~3% cash buffer which is currently held for liquidity purposes.
[5] % of the QRI loan portfolio, excluding AFWT notes, cash and the Trust loan receivable.
[6] The payment of monthly cash income is a goal of the Trust only and neither the Manager or the Responsible Entity provide any representation or warranty (whether express or implied) in relation to the payment of any monthly cash income.
[7] Returns are not guaranteed. The premium achieved is commensurate to the investment risk undertaken.
Disclaimer
This communication has been issued and authorised for release by The Trust Company (RE Services) Limited (ACN 003 278 831) (AFSL 235150) as responsible entity of The Qualitas Real Estate Income Fund (ARSN 627 917 971) (Fund) and has been prepared by QRI Manager Pty Ltd (ACN 625 857 070) (AFS Representative 1266996 as authorised representative of Qualitas Securities Pty Ltd (ACN 136 451 128) (AFSL 34224)).
This communication contains general information only and does not take into account your investment objectives, financial situation or needs. It does not constitute financial, tax or legal advice, nor is it an offer, invitation or recommendation to subscribe or purchase a unit in QRI or any other financial product. Before making an investment decision in respect of the Trust, you should consider the current Product Disclosure Statement (PDS) of the Trust and the Trust’s other periodic and continuous disclosure announcements lodged with the ASX which are available at www.asx.com.au and assess whether the Trust is appropriate given your objectives, financial situation or needs. If you require advice that takes into account your personal circumstances, you should consult a licensed or authorised financial adviser.
While every effort has been made to ensure the information in this communication is accurate; its accuracy, reliability or completeness is not guaranteed and none of The Trust Company (RE Services) Limited (ACN 003 278 831), QRI Manager Pty Ltd (ACN 625 857 070), Qualitas Securities Pty Ltd (ACN 136 451 128) or any of their related entities or their respective directors or officers are liable to you in respect of this communication. Past performance is not a reliable indicator of future performance.